luxury cars

A recent blog post on JanusThinking.com looked at the seeming imperviousness of the Chinese luxury goods market to the economic slowdown.

Image courtesy of Stock.XCHNG

The Financial Times reports that the luxury car market is travelling in the same direction, with cars speeding out of showrooms despite challenging fiscal times.

Carmakers’ robust financial results seem to demonstrate that it is the emerging markets’ taste for luxury vehicles that are driving this trend. Bentley saw 37% sales growth last year, with BMW, Mercedes-Benz, Audi and Porsche also firmly in the driving seat when it came to sales outside the Eurozone.

Europe, however, is not seeing the same level of demand. Austerity measures, taxes on high-income earners and a firm crackdown on tax evasion mean slowing sales in the sector.

The blog claims that in Italy, tax evaders are reportedly returning luxury cars such as Ferraris to avoid the unwelcome attentions of tax officials – it relates one anecdote of a wealthy driver in Milan keeping his tax returns in his car to prove to suspicious police that he’s paid the necessary dues.

The slump in luxury sales adds pressure to the Italian automotive market as the economy continues to slow down. But whether popular in Italy or not, it’s clear that luxury cars like Ferraris remain firmly in fashion in emerging markets.

Isaac Mostovicz writes that focusing on service is better than creating controversy...

In recent years in the US, Hyundai has been working to shed its image as a budget automaker by focusing on quality, styling and performance. They seem to have found some success, as they are now in a position where they can launch a new luxury automobile, the Equus, that could cost as much as $60,000. Hyundai is going out of its way to offer services that few other luxury automakers offer: they are driving the car to peoples’ homes to give them the chance to test drive the car at their convenience, and they are also offering a valet service, where owners having trouble will be visited by a Hyundai service technician who will fix the problem or take the car in for repairs, leaving a loaner vehicle behind. This sort of service sets Hyundai apart and may work to further distinguish the brand from its budget beginnings.

While this Hyundai scheme focuses on individual attention, Lexus recently announced a marketing strategy bound to create collective controversy. They are hosting a series of debates about climate change featuring non-scientist climate change deniers. It’s unclear whether Lexus is supporting and endorsing these unscientific views by bringing in these dubious ‘experts’, or drawing attention to them to show that there’s more to the argument than these deniers say. In either case, Lexus would be better served by hosting debates with experts from both sides of the argument.

Lexus’s attempts to go for controversy may backfire, especially as they have pushing green features in their cars for a long time now. Rather than potentially alienating some of their customers while creating a large controversy, they would be better served by doing what Hyundai is doing, offering the kind of service that people will only respond to well. Hyundai is creating good word of mouth that will enhance its brand’s reputation, something Lexus has been known for doing in the past — but this climate change controversy may cause more harm than good.

Isaac Mostovicz writes that the attention of car makers was shifting at the Beijing auto show...

Luxury cars stole the spotlight at this year’s Beijing Auto show, despite its original, intended focus to be aimed at green technology. The article on Merinews describes the shift of attention as being due to car makers’ response to the unanticipated, phenomenal, economic growth in China’s auto market.

Last year China’s auto market outsold the US by a staggering 13.6 million vehicles in comparison to US’ 10.4 million. In particular interest to these car manufacturers’ is the amount of luxury cars being sold in China. The LA Times has the figures:

Although many of those vehicles are stripped-down economy models, the nation’s wealthy are fast developing a taste for pricey cars.

Luxury car sales in China were up 66% the first three months of 2010 compared with last year, according to J.D. Power and Associates.

Mercedes-Benz has seen its China sales more than double so far this year compared with 2009.

BMW announced at the event that it was boosting its sales target in China from 100,000 to 120,000, which would make the country its third-largest market. The company sold 90,000 cars here last year.

Favourite cars among these luxury Chinese consumers are Ferrari’s 599 GTO, Porsche’s Panamera 4 and Mercedes Benz’s SLS AMG. People choose these sorts of cars for their features, and the most popular include cars with more legroom and footstool in the rear, Bang & Olufen Speakers, ambient lighting with rotating colours, walnut folding table, 10.2 inch LCD screen and massage chairs. These backseat features take precedence over the driver’s seat because it is the preference and style of Eastern buyers to be chauffeured around in what Audi A8 project leader, Matthias Mueller calls ‘statement’ cars; ‘It has to show you’ve made it.’ Popular buyers in this market appear to gravitate more towards Lambda personalities, because not only do they get the extravagant interior of the car but also the show-stopping exterior that Lambdas would immediately attach a back story to. A story of success, achievement and accomplishment and in a manner that is so hard to miss. Thetas would also love these luxury makes as it not only provides discreet opulence within but also maintains their desired standing among China’s elite community.

Isaac Mostovicz writes that selling luxury to a Lambda personality means understanding both how he sees himself and how he wishes to be seen...

While there was not doubt that Aston Martin is a brand aimed strictly at Lambda personalities, the recent product release by Aston Martin proves it anyways.

Coming optional with the purchase of a new Aston Martin Rapide is a $33,000 watch. And with this watch and your new Aston Martin Rapide, you can lock or unlock their car doors by simply touching the sapphire-crystal face.

Only a handful of individuals can afford to buy even the Aston Martin. Even fewer could afford the optional $33,000 watch. The timing of this is interesting, because while the global recession is receding, it is not completely over, yet.

Watches are a much-loved item amongst Lambda personalities, because they bestow status and are durable. They’re seen as investments and heirlooms.

During the worst pont in the recession, The Wall Street Journal published a column “How to sell a $35,000 watch in a recession”, which offers a look into the new methods that luxe retailers are using to keep sales moving.

After years of double-digit sales growth, sales of Swiss watches have fallen off drastically. Watchmakers like IWC—a 140-year-old company whose watches are considered collectors’ items and generally cost between $3,000 and $300,000—are having to re-learn the old-fashioned art of salesmanship.

The ‘old-fashioned’ art of salesmanship that is used is selling the experience as tantamount to the product itself. In luxe, people buy because it looks good, feels good and it makes them appear important.

He used PowerPoint to impart what he calls the “macaroon technique,” referring to the sandwich-like French macaron pastry. This can be applied to most any product (including, presumably, a Xerox machine) and goes something like this: “Madam, this timepiece (or diamond or handbag) comes from our finest workshop and it has a value of $10,000. If you buy it, your children are sure to enjoy it for generations to come.”

This tactic by Aston Martin to package the watch with the car is an extension of the salesmenship methodology talked about in the Wall Street Journal article: Show a Lambda personality how well their new, ultra-exclusive watch works with their new, ultra-exclusive car.

The expression also suggests the person will have a long family line, which causes them to envision their children and grandchildren as Lambda personalities, enjoying and cherishing this watch that their father, also a Lambda personality, purchased years ago and passed onto them.

A true Lambda Personality won’t be able to resist it, and Aston Martin knows this.

Isaac Mostovicz writes that America's innovation hub could touch of a resurgence in the U.S. luxe industry...

If the statistics found in a Wall Street Journal article published yesterday are to be believed, then Silicon Valley in California may be the signal we’ve been looking for of a return to norms in the American luxe market.

According to the article, there has been a recent spike in the number of luxury and higher-end vehicles sold in the region.

Over the course of 2009, Silicon Valley’s sales of the priciest car brands rose, according to R.L. Polk & Co., which analyzes the auto industry. In November, for instance, 15 Lamborghinis, Bentleys and Maseratis were newly registered in the Bay Area, up from four in January 2009, notes Polk.

While not a bell-weather event, it is encouraging to see American luxe figures doing something other than nosedive.

Vincent Golde, general manager at Qvale Auto Group’s British Motor Car Distributors in San Francisco, also noted the up-tick in sales:

[S]ales of luxury brands improved in the second half of 2009 with his dealership—which handles Lamborghinis, Bentleys and others—particularly experiencing an increase in Bentley sales. Most of the car brands at BMCD start at $180,000 per vehicle.

What could this be attributed to? It’s possible that the region’s Theta personalities are regaining some confidence in the market and are feeling more comfortable spending larger sums of money, as the economy continues to slowly improve.

Mr. Golde said many of the transactions were for used vehicles rather than new cars as customers wanted to “let the [financial] crisis pass a bit.”

I expect that more recent figures will show that the market has continued to improve alongside the economy, which bodes well for the luxe industry across the country and even globally.

Isaac Mostovicz writes that India's position as the new battleground for luxe brands could be the beginnings of an industry shift...

India has become a battleground for the luxury industry, with both BMW and Mercedes competing for the spot of top luxe car brand in the country.

This year BMW plans to launch three new luxury brands in India, according to the Press Trust of India. BMW India President Peter Kronschnabl told reporters:

“BMW Group will further increase its commitments in India by bringing in more investments in the country through further capital investment in BMW plant in Chennai and BMW Financial Services India.”

This move likely comes in response to recent overtures by Mercedes aiming to regain the top spot in India from BMW. In the India Times, Mercedes Benz CEO Wilfried Aulbur explained why he thought Mercedes fell behind BMW in 2009:

“We lost out BMW in 2009 because of limited availability of our E-Class car” … “This will be a blockbuster year for us in India. We have launched new cars and would import several models to build up excitement through the entire year.”

I wrote previously that luxe brands are now finding themselves competing for dominance in non-traditional luxe markets, particularly in Asia. This is just an extension of that. Meanwhile in China, luxe car brands are also doing battle for market dominance, particularly Audi and BMW.

While the West continues to recover from the crippling recession, Asia will continue to grow its luxe markets, thanks in part to newly-wealthy Lambda personalities now throwing their wealth around. With all the uncertainty in the luxe industry today, one thing is certain: 2010 will be a very interesting year for luxe in Asia.

Isaac Mostovicz writes that luxury automotive companies are beginning to see China as their saving grace...

Asia is continuing to serve as the luxury industry’s bright spot amongst an otherwise dismal global market, due largely to the recession. I wrote previously about BMW seeing growth in its Chinese market, which triggered a planned seven-fold increase in its China production capacity.

It appears that the phenomenon is not limited to BMW. Other luxe car companies are seeing considerable increases in the number of cars sold year on year. AFP reports:

Audi said earlier that it had sold 8.9 percent more cars in November on a 12-month basis, with Chinese sales leaping by 101.9 percent to 16,503 vehicles as the company surpassed its annual sales target there, a statement said.

This signals yet another instance where China is making gains whilst Japan tries to pull its luxe market back into place. Since I wrote in November that Japan was facing a loss of confidence by luxe retailers, investment into lesser-known Asian luxe markets has moved forward. As China continues to liberalise its economy, its luxe industry will only grow further.

Toyota and ultra-luxury carmaker Aston Martin recently announced a somewhat surprising alliance, as they released plans to build the world’s first luxury city car, positioned as a “luxury commuter concept”. The car is likely to be the smallest four-seater in the world. It will be based on Toyota’s iQ model, while featuring traditional Aston styling cues. It is set to be built in Japan, but get its finishing touches at Aston Martin’s plant in Warwickshire, UK.

Dr. Ulrich Bez, chief executive at Aston Martin, was quoted in the Financial Times saying “This concept — akin to an exclusive tender to a luxury yacht — will allow us to apply Aston Martin design language, craftsmanship and brand values to a completely new segment of the market”.

In today’s environmental pressures and global economic downturn this car looks like a good option for affluent consumers living in CBD areas, who wants a dynamic car that fits into tiny parking spots and is suited for traffic jams.

The question is, however, if James Bond, who famously used to drive Aston Martin cars in his earlier films, would find this commuter car to have quite the same appeal as the sporty Aston Martin supercars he is used to.

There’s no doubt it does look better on the road than in static shots, with a certain brutal elegance, but there’s just too much ‘Bargain basement Crossfire ‘ going on around the rear. It’s a sofa on wheels. The Estoque just crucifies it down the country road catwalk. Reminds me of the Bristol 405…

It’s a pity Porsche hasn’t had a new idea for 44 years…because when they actually have an idea it’s generally a good one! Porsche 911 RS anyone? Mmmm.

As the financial crisis threatens to wipe out the global financial system, times are tough for Wall Street and Main Street alike. How is the crisis affecting the luxury goods industry? According to Bain & Co, while certain niches have seen a dip, the luxury marketplace as a whole remains increasingly strong in the face of economic collapse.

Moet & Chandon, for instance, views the current financial chaos as just a hiccup in the long history of political, social, and economic crises—all of which the Champagne house has survived. Luxury products, they argue, are the most desirable during times of distress, where people hit hardest need something to hope for while those of extreme wealth will always have cash to spare for indulgences.

Similar sentiments ring true throughout the luxury market. Another article points to stability of the luxury car, where interest in Ferrari’s new $250,000 car hasn’t waned a bit, and Bentley sales grew by 20% last year. Luxury car companies are also moving away from countries worst hit by the crisis, focusing on expansion into emerging markets like India, China, and Russia.

However, such optimism may be subdued if the crisis continues at this rate. Forbes predicts that while luxury retailers avoided the first downturn, they are “far from immune.” The article predicts that upscale chains (such as Sak’s and Neiman Marcus, who saw September sales fall 11% and 16%, respectively) may need to discount products up to 20% over the holiday season.

What does this mean for you? While the crisis may demand a closer eye on your wallet, don’t think luxury will go to the wayside—it may just be on sale.